The management of Pakistan Television Corporation (PTV) entered into a multibillion-rupee agreement with a private firm for the digital streaming of content without seeking approval of its board in violation of corporate governance rules of public sector companies.
Details showed that PTV signed the deal in October last year with Z2C Pakistan Private Limited. Sources told The Express Tribune that the board questioned the management in its last meeting about bypassing it in reaching the deal that carried financial implications for the entity.
It may also expose the deal to legal scrutiny, although the party had been shortlisted after following the competitive process.
The one-year agreement can be renewed after expiry with mutual consultation and then can automatically be renewed yearly for three successive years. The management has bound the state-run entity into a potentially five-year deal without final nod of the board, showed the details.
The agreement has become effective for over-the-top (OTT) media service but the service has not yet been officially launched, according to the sources. The OTT agreement was signed for the provision of video-on-demand and streaming of current and achieved content.
When contacted, the PTV management defended the decision of avoiding the board scrutiny of the deal. “The agreement was made after open prequalification and financial bidding process, pre-audit and legal vetting of the case by PTV audit and legal department,” said PTV Managing Director Sohail Ali Khan.
He added that a high-level committee of PTV directors and senior officials had been formed to oversee and complete the whole process.
“The tendering was done as per PPRA rules, so no exemption and approval were required from BOD,” said the MD. He added that a complete digital strategy along with concepts including digitisation of archival content and its monetisation on digital platforms had already been discussed and endorsed by the PTV board.
But bypassing the board in such a big financial matter was a violation of the Public Sector Companies (Corporate Governance) Rules 2013.
The rules make it mandatory for all public sector companies to place key information before their boards for discussion and approval.
Rule 7 states “significant issues shall be placed before the Board for its information and consideration, to formalise and strengthen the corporate decision-making process.”
Rule 7 (d), which is directly relevant to the PTV deal, states “details of joint ventures or collaboration agreements or agreements with distributors, agents” will be placed before the boards for approval.
Rule 7 (i) states that inter-corporate investments in and loans to or from associated concerns in which the business group, of which the public sector company is a part, has significant interest have also to be placed before the boards.
According to the PTV deal, Z2C will share 10% of the revenue with PTV during the first year, which will increase to 15% during the second year and from the third year the ratio will rise to 20%.
The second bidder, Convex Interactive Private Limited, had offered a 40% revenue share to PTV for the first two years and 60% for the next three years.
However, Convex’s revenue forecast for the next five years was low, which led to low minimum guaranteed revenue. It caused Convex to lose the bid on financial score despite beating Z2C in technical score. The combined score of Z2C was higher than Convex’s score.
But PTV may sustain a potential loss if actual revenues increase more than the projection of Z2C due to its far higher share.
To a question, the PTV MD said “although Convex offered attractive revenue-sharing percentages, their minimum guaranteed amounts were much lower than those offered by Z2C for five years.”
Convex’s minimum guaranteed revenue was less than half of what Z2C offered.
The PTV management said that being a newly launched platform, it would initially require two to three years to stabilise the position and then could generate handsome revenues. Therefore, “a more realistic revenue share accompanied by a minimum guaranteed amount is considered to be better,” said the MD.
He said that PTV being the owner of the platform would only be the provider of the content. Moreover, all the content and platform are owned by PTV.
Published in The Express Tribune, March 29th, 2023.
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